Britain’s digital economy is a success story but the government must provide greater clarity on regulation and ensure it stays on track in light of the EU referendum result, the Business, Innovation and Skills (BIS) Select Committee finds in a report on the Digital Economy.

The report describes the UK as a “digital leader” with “significant growth in the digital economy”. However, the Committee calls on the government to set out in its forthcoming Digital Strategy the implications of Britain’s withdrawal from the European Union.

Issues that need addressing include the impact on UK tech firms employing digitally-skilled EU migrants and access to the European single digital market for British-based companies, the committee said.

Regulation

The report also urges the government to clarify regulation for disruptive technologies, such as Uber and Airbnb, so as to promote productivity, innovation and customer choice and protection, while safeguarding workers and ensuring fairness.

The report highlights how so-called digital disruptor businesses can get a competitive advantage because they often do not have to comply with the same regulations as the businesses they are disrupting. Airbnb providers are not bound by the health and safety regulations of hotels, for example.

The committee said regulation should be clarified to ensure fairness, but that the government should not necessarily seek to protect business models challenged by disruptive technologies. Regulation should put the interests of consumers first – although not at the expense of employment rights – and encourage innovation, choice and competition, the committee added.

The report also recommends a more collaborative approach to regulation, with digital platforms having a role in the regulatory framework by being required to ensure that users are compliant with regulations and workers have reasonable employment conditions.

Implications of Brexit

The publication of the government’s Digital Strategy has been delayed by over six months. The committee urged the government to set out in its Digital Strategy implications of Brexit, with reference to specific, current negotiations relating to the digital economy.

The committee said ministers should also address fears that the UK’s position as a world leader in fintech – companies using technology to make financial services more efficient – is at risk because businesses based in Britain may look to relocate to another country in order to remain inside the EU.

The report also recommends the government:

Explores ways to more accurately measure the digital economy with high-quality, real-time data and reflect this in policy-making,

Addresses how differing business workforce models, such as small tech firms with a small number of highly-skilled workers, are not compromised through the apprenticeship levy.

Iain Wright MP, chair of the Business, Innovation and Skills Committee, said: “Britain’s digital economy is a success story that makes a huge contribution to the country’s competitiveness and wealth-creation capacity and the Committee recognises the government’s support in this area.

“We look forward to publication of the Digital Strategy and urge the government to set out how it plans to build on Britain’s digital success post-Brexit. This includes urgently addressing the concerns of tech companies who rely on the single market and high-skilled migrants from the EU.

“Technology is revolutionising business, transforming virtually all aspects of the economy and society. Digital advances have brought considerable benefits to consumers but they have also pushed at the limits of current regulation, creating a tension between so-called disruptors and those businesses being disrupted.

The government needs to clarify regulation to ensure fair competition while enabling digital businesses to thrive and grow to the benefit of consumers and the UK economy.”